• Paint shop barricade continues
  • Police spray tear gas from helicopter
  • Liquidation looks likely

Thousands of riot police laying siege to protesters at troubled SUV maker Ssangyong have sprayed liquid tear gas from a helicopter after talks to end a prolonged occupation by strikers collapsed.

Television pictures showed police with helmets and shields moving closer to a paint shop at the Ssangyong Motor plant in Pyeongtaek, 70km (43 miles) south of Seoul.

Three days of talks between managers and union leaders broke down on Sunday, raising concerns the debt-stricken company may go bankrupt.

Hundreds of workers - armed with metal pipes and slingshots have occupied the factory since 21 May in protest at job cuts and, though police moved in on 20 July and took over some buildings, strikers have held out in a barricaded paint shop stacked with inflammable materials. Management has cut off water and power supplies to that part of the plant.

In February Ssangyong secured court protection from creditors after China's Shanghai Automotive Industry gave up management control. Court appointed managers have since struggled to turn it around through job cuts and cost savings.

They said they need to fire more than 2,600 workers, or 36% of the workforce. About 1,670 of these have taken voluntary retirement but the others began the occupation. Around 600 are still holed up inside the paint shop.

The standoff is estimated to have cost about WON300bn (US$244m) in lost revenue. The company said the long strike had prevented over 13,000 vehicles from being produced.

Ssangyong is scheduled to file a revival plan by 15 September when its future will be decided in court. In addition, an association of Ssangyong creditors warned on Thursday that it would file for bankruptcy if the strike at the carmaker's Pyeongtaek plant was not resolved by the end of July.

The creditors said they would file a petition asking the courts to declare the carmaker bankrupt as soon as possible and begin the process of selling and rebuilding the carmaker into a 'good Ssangyong' at the beginning of August if the strike continued.

The Korea Herald said some industry insiders consider establishing a 'good Ssangyong' an unlikely option as the company has only one brand and little assets to sell. Finding a buyer for the company is likely to be difficult as foreign companies with sufficient funds are focusing on buying US carmakers' assets.